It is only appropriate that we start debating this topic - especially after jokes about Boeing as the next Enron?

So let's see:
1. Shareholders were left in the dark until last summer on A380 delays
2. One of EADS chairman sells a large amount of his share before the word gets out
3. He tells his kids to do the same
4. French president protects his pal from insider trading
5. BAE who wanted to sell its stake in Airbus also finds out too late about the A380 problems
6. BAE alleges Airbus purposely chose its timing in order to minimize the buyout of BAE
7. Airbus loses its CEOs
8. Airbus is facing massive A380 program delay penalties and facing severance costs as part of workforce reduction
9. Another Airbus CEO resignation
10. French and German politicians get involved this week to keep things at a diplomatic tone

Enron engaged in systematic and massive fraud. Airbus's problems are mostly technical in nature with a couple of people trying to minimize the corporate and personal damage of those problems, perhaps illegaly. Anything illegal at Airbus would be a trifle and only a consequence of legitimate problems not the basis of its entire balance sheet.

The two are not the same. Airbus produces something. If they go under (which they won't, I hope ) it is simply because potential costs to deliver the products outstrip revenues over a long enough period of time. Fundamental economic principle at play here.

I do not see any similarity in the business models - just to explain what Enron was:

Enron Venture Capitalism You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt-equity swap with a associated general partnership so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority share-holder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more.

Whereas Airbus gets an order for a plane, builds it, delivers it to the customer who ordered that plane and receives the cash in turn., There may be some delays however.

Quoting PanHAM (Reply 4):Enron Venture Capitalism You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt-equity swap with a associated general partnership so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority share-holder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more.

Quoting PanHAM (Reply 4):The annual report says the company owns eight cows, with an option on one more.

Brilliant, I was wondering how to characterise the difference and you got it zackerly! As there is no attribution, I assume it was your own work, in which case, watch out for the job offers from "Son of Enron".

The only way that Airbus is like Enron, is if those folk who saw the Whale land at various airports were actually watching really, really good holograms. I am not sure what the (distant) rel of mine who thinks he recently had a flight in the A380 was actually doing - hypnotised by a German descendant of Freud I suppose.

Quoting Baroque (Reply 8):
Brilliant, I was wondering how to characterise the difference and you got it zackerly! As there is no attribution, I assume it was your own work, in which case, watch out for the job offers from "Son of Enron".

no, I cannot take the credit for that. This was part of a joke circulating when Enron bit the dust and I thought it fit perfectly.

Quoting N328KF (Reply 5):Where that cow may deliver less milk than intended, and the beef will definitely not be 'lean.' And it eats 10% more grain than other cow

....as we talk about real cows, Airbus, like Boeing and any other industry will do what farmers have done for centuries, they learn from mistakes and engineer (breed) a better product.

Quoting Jasond (Reply 3):The two are not the same. Airbus produces something. If they go under (which they won't, I hope ) it is simply because potential costs to deliver the products outstrip revenues over a long enough period of time. Fundamental economic principle at play here.

This and other reasons given have nothing to do with saying it is not like Enron. What is not the same with Enron is that no-one form Airbus stole company money like Andrew Fastow did when he was CFO at Enron. And no one cooked the books or falsified financial data.

But there are similarities between CEOs of Enron and EADS. Jeffrey Skilling was found guilty in falsifying financial statements and hiding information from shareholders. He and Ken Lay were charged for insider trading when they sold their stock before all hell broke loose. Ken Lay was also a friend of the president of the country he lived in (Ken Lay died unexpectedly this past summer waiting for sentencing).

Now here is the part that is similar with EADS. EADS co-chairman Noel Forgeard suspiciously sells hist stock and tells his kids to do the same. It is suspicious as keeping it a secret about the news of A380 delays is no small matter. Especially when it has such a strong impact on the financial health and forecast earnings of Airbus and its co-owner EADS. Both have shareholders and these shareholders have the right to know news such as these as early as possible. Noel was forced to resign not because the A380 was late (that is more of Airbus leadership mismanagement rather than EADS), but his dubious behaviour to benefit his personal finances that are linked to the A380 delays. President Chirac then gets involved (and we will never know to what extent) to save his protege Noel. Why can't the investigators do their job without the president of France getting involved? The whole thing about Noel has since gone quiet.

Hiding or massively delaying news that are considered important can be considered breach of securities laws. Any corporate communications VP will tell you that. Insider trading goes without arguments. Perhaps there were many more people who knew and benefited from these news at EADS, and it is being covered up. What brought down Enron was the collapse of its stock due to wide scale corruption. If EADS stock plunges as a result of confidenece in the equities markets due to corruption alligations , it will not be a pretty picture. Skilling and Lay purposely kept information from the scrutiny of hard questions by suspicious equities analysts. Perhaps there is more to why the German government yesterday said they would buy a large stake in the company (other than saving German Airbus jobs).

Airbus isn't Enron. Period. But a lot of the governance problems that existed at Enron exist (in some cases much worse) at Airbus. If Fastow worked for Airbus he could do everything he did at Enron.

Quoting Robsawatsky (Reply 2):Enron engaged in systematic and massive fraud. Airbus's problems are mostly technical in nature with a couple of people trying to minimize the corporate and personal damage of those problems, perhaps illegaly. Anything illegal at Airbus would be a trifle and only a consequence of legitimate problems not the basis of its entire balance sheet.

Part of the problem is that Airbus doesn't publish the detailed balance sheet information (EADS does for the parent company) that would be demanded in the US, to say nothing of the hugely complex SOX requirements that were a response to the Enron failure.

Airbus's books are sigificatly difficult to work out. Just look at the hard time people are having just figuring out how much the A380 is over budget by.

One of the reasons I want to see this artificial EADS structure go away, is because it might mean that we finally get good fiscal analysis and people doing their homework on EADS/Airbus and their programs.

Quoting Tangowhisky (Reply 10):Now here is the part that is similar with EADS. EADS co-chairman Noel Forgeard suspiciously sells hist stock and tells his kids to do the same. It is suspicious as keeping it a secret about the news of A380 delays is no small matter. Especially when it has such a strong impact on the financial health and forecast earnings of Airbus and its co-owner EADS.

It does not look good and I am sure the police will tell us eventually whether it was illegal or not. Some time ago, when the Forgeard transactions were first discussed, someone wiser than I pointed out that not only were the times that Forgeard could sell strictly prescribed, but the family sales were all part of the same deal, that is it was a single sale decision, which may or may not make it all more or less suspicious. But it is different from saying he tipped off his family. One day we may find out.

Quoting Baroque (Reply 13):It does not look good and I am sure the police will tell us eventually whether it was illegal or not. Some time ago, when the Forgeard transactions were first discussed, someone wiser than I pointed out that not only were the times that Forgeard could sell strictly prescribed, but the family sales were all part of the same deal, that is it was a single sale decision, which may or may not make it all more or less suspicious. But it is different from saying he tipped off his family. One day we may find out.

Does France have a group with authority similar to that of the SEC?

When they call the roll in the Senate, the Senators do not know whether to answer 'Present' or 'Not guilty.' T.Roosevelt

Quoting Bmacleod (Reply 16):How did a few A380 delays turn into rumors that Airbus was a corrupt company on the verge of total collapse. They did outsell Boeing last year or the year before, right?

5 years from now when the A380 delays are ancient history and Airbus WILL STILL BEIN BUSINESS, we'll all remember late 2006 when rumors of Airbus' collapse were rampant....

I don't think anyone with two brain cells to rub together truly believes Airbus is going bust. As I've said in previous threads, the pendulum swings both ways. This year (and last year, if you take order counting practices into question) the pendulum swung toward Boeing. For all we know, it could swing back in Airbus' favor next year.

One things' for certain. For the "rumors" to stop, Airbus has got to become a more transparent company. Perhaps that'll be the outcome of all this A380 and A350 (MK I, MKII, MK III, MKIV, MK V & XWB) hoopla.

Quoting Danny (Reply 14):
Rest assured that concept of internal control are not unknown in Europe even if we do not have SOX. Nothing of this gets published anyway other than auditor opinion on controls.

Then how do you know they are being enforced? The amount of transparency (or rather the lack) is a critical question for the long term survival of Airbus, not just during the current crisis. Lack of visibility into the accounting and orders practices leaves the door wide open for abuses.

What is wigging some people out is that a bit of the langauge (investors complaining about incomplete or incomprehensible statements, lack of break down of profit levels beyond just a "Airbus is a devision of EADS and generated 1.5 billlion, etc) all immediate recall the accounting scandals that were triggered by a market downturn.

Again, I am not saying that Airbus is enron. I am saying that no one can say with authority what Airbus's true fiscal picture is right now.

Quoting AirFrnt (Reply 18):The amount of transparency (or rather the lack) is a critical question for the long term survival of Airbus, not just during the current crisis. Lack of visibility into the accounting and orders practices leaves the door wide open for abuses.

EADS stock is listed in three European exchanges and perhaps the level of disclosure and transparency is adequate to meet their criteria. Does someone know if EADS reporting system would meet US type General Accounting Principles? If it does not, than perhaps that may be one reason it is not listed in NYSE. But the whole issue of transparency is even more important for the investment community. CEO's come and go as loosing faith in the management is one thing and usually less damaging than losing faith in the numbers the company says it has is another. As long as EADS is publicly traded and needs money from the capital markets, it's numbers better and should be transparent.

I interviewed many people inside Enron in the late 1990s as part of my academic research in business, business models, and strategies. I met very sharp, bright people who took great pains to explain many of their ventures and business models. Very few of them ever made real sense to me. They were all a big house of cards. I came away from those days never wanting to own their stock, and I made sure that any mutual fund I owned has very small positions in them. In fact, in many interviews, some of the people would start the discussion with, "Now, this might require you to listen with a bit of a leap of faith...." then they would explain their gas futures modeling system, or some other creation.

Airbus is a going concern, with product lines, technologies, and a focus. Even though there are shenannagins coming out at the edges, it is a real company with a future. My visits there leave me with the fealing of being hindered with a very complex organization, processes and procedures, and more, but the people are diligent are building real things with value.

Quoting Tangowhisky (Reply 20):EADS stock is listed in three European exchanges and perhaps the level of disclosure and transparency is adequate to meet their criteria. Does someone know if EADS reporting system would meet US type General Accounting Principles? If it does not, than perhaps that may be one reason it is not listed in NYSE.

One exchange (Euronext), three cities. Think of it as three stores in a chain.

EADS would definitely not meet GAAP. The 2005 order stunt would have instantly failed them.

When they call the roll in the Senate, the Senators do not know whether to answer 'Present' or 'Not guilty.' T.Roosevelt